Angela Knight, chief executive of the British Banking Association, in a new year's letter to her peers, criticised the government for being "deeply irresponsible" and potentially "stupid enough" to act "emotionally and not logically" in its attack on banks, bankers and bonuses. She has been particularly critical of 50% tax on bankers' bonuses.
However Ms Knight does not understand that the banking is a drain on taxpayers' money in the same way as more traditional national industries had been in the past before they went under. The amounts of monies guaranteed, paid, or to be paid, by the government to rescue the banking businesses (stimulus packages, quantitative easing), £860 billion and probably much, much more, far outweighs the tax income. The banking industry must face it: it became utterly unproductive and lives off state subsidies and brings losses in the same way as steel, shipbuilding or coalmining, and so on, did in 1970's and 1980's.
Ms Knight pointed out "the UK has a record of building up great industries such as in steel, shipbuilding, engineering. It also has a history of losing them". (She does not mention however that it was with the bankers' "help" who benefited from that "loss".) Ironically she appears to have become a critic of Margaret Thatcher as she continued: "it loses industries by: taxing them wrongly; regulating them inappropriately; not investing in them; and taking actions that prevent them from being internationally competitive". Sounds like brown-nosing the New Labour (never mind the pun, Prime Minister). In the 1980's the leader of miners, Arthur Scargill, used similar arguments against the Thatcher's government stopping "supporting" coalmining industry. But Mr Scargill was arguing for decent miners’ wages, not lottery wining paycheques. Ms Knight is taking this argument to complete absurdity: the taxpayers should support millionaires. Like it or loath it, but it was Thatcher's reforms that led to the British economic revival of the 1980's. Not only does it show bankers' loss of touch with reality, but a complete loss of economic, and indeed rational, thinking. Bankers appear to believe - in the same way as until Thatcher’s era reforms steel, shipbuilding, coalmining (and some other) industries believed - that they are so great and important that they should always be rescued and supported by the taxpayers. Such thinking led to these industries downfall. It was giving state subsidies, call it "stimulus packages", in the first place that led to these industries downfall - as it effectively made them complacent disregarding the need to adapt to the changing world - not withdrawing them once the taxpayers could not bear the costs any longer. The fact that bankers repeat trade unions mistakes of the 1970's and 1980's is not a good prognosis for the future of the financial industry. And indeed it shows what kind of "top talent" banking has attracted.
100% agree. These bankers are dinosaurs of the past (like British Leyland). They have failed and cost the country a forune. Time to move on and focus on real wealth generation not relying on the gambling of these wide boys.
ReplyDeletedavid, I think comparison with British Leyland is pretty good. The story repeats itself failure, bailouts but ultimately extinction. It looks like a Darwinian mechanism: if you do not adapt yourself, bailouts are an expensive ways of delaying inevitable extinction.
ReplyDeleteUsurpation of Nation State Sovereignty by the IMF offering solutions to their manipulated financial crises worldwide is what people should be aware of. Problem- Reaction Solution- works every time on gullible people.
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